People passing by in the pedestrian area of the Bavarian capital.
Peter Kneppel | Picture Alliance | getty images
Inflation in Germany surged to 2.4% in October, again above the European Central Bank’s (ECB) target of 2%, even though the country narrowly avoided a technical recession in the third quarter.
The preliminary report, published by the German statistical office Destatis, is harmonized across the euro area for comparison purposes.
Analysts polled by Reuters had expected harmonized inflation to reach 2.1% in October.
Harmonized inflation fell to 1.8% in September after reaching the European Central Bank’s 2% target in August.
So-called core inflation, which strips out more volatile food and energy costs, was 2.9% in October, Germany’s statistics office said Wednesday, up from 2.7% in September.
Service inflation also increased from 3.8% in the previous month to 4% in October.
Deutsche Bank economist Sebastian Becker said in a note translated by CNBC that the new rise in core inflation shows that the problem of rising prices is not resolved and more patience is needed.
“There are signs that inflation will be higher in the near term,” he said. “Base effects alone could cause this to happen.” However, the current weakness in the labor market suggests key figures will slowly ease over the next year.
Germany’s Federal Labor Agency reported Wednesday a larger-than-expected rise in the number of unemployed people in October, adjusted for seasonality, Reuters reported.
Meanwhile, Carsten Brzeski, global head of macro at ING, said inflation was expected to rise further in the final two months of 2024 and then remain between 2% and 3% throughout next year.
“The rigidity of slightly higher levels of inflation is likely to continue as favorable energy-based effects continue to wear off while wages rise,” he said.
The inflation data comes after Destatis released preliminary figures earlier on Wednesday showing Germany’s gross domestic product (GDP) rose 0.2% in the third quarter compared with the previous three months.
The increase surprised analysts polled by Reuters, who had expected a 0.1% decline, narrowly allowing Germany to avoid a technical recession that would mark a second straight quarter of contraction.
Destatis also downgraded its second quarter GDP figure to a 0.3% contraction from a previously reported 0.1% decline.
Consumer price data for the wider euro zone is due to be released on Thursday.
